Friday, August 14, 2009

Record Real Wage Increase of 5.15% in July

According to today's BLS Real Earnings report, average hourly earnings for workers in private industries, measured in real dollars (constant 1982 dollars), increased in July by 5.1% compared to July of last year, and this is the largest percentage increase in real hourly earnings in BLS history (back to 1965, see chart above). The 5.1% increase marks the first time ever that real hourly earnings have increased more than 5% in a single month (vs. the same month in the previous year).

10 Comments:

This does not square with labor slack. Increased real hourly earnings does not occur when demand decreases and supply increases. Average weekly hours is down to record lows. Capacity utilization is at record lows. The ONLY thing I see pushing up real wages is the minimum wage. Unfortunately increasing (by dictate) a persons wage does not increase their marginal productivity.

Again, we're not seeing what can be categorically referred to as "good news".

The link to the BLS data states that the majority of the increase in earnings stems from an "increase in average weekly hours". So yes, when hourly workers have to work more hours, their weekly earnings increase.

The other part of the weekly wage increase stems from an increase in the average hourly wage. When you layoff your junior and less tenured workers and require your remaining workers to work more hours to pick up the slack, then average hourly wages are increased.

While people are loosing their jobs, and those who aren't are getting pay cuts and fuloughs, all I can see pointing to the 5% increase in Real Wages is the -2.1% fall in prices. Dont forget this is July/July so we're compairing $140 oil to $70

I don't think this post provides us enough information to say how Perry feels about the unemployed. Perry posts good economic news, and this post is good economic news, but I (as I said in an earlier comment) don't believe it is proof of recovery.

Another anon commenter said "Cut out a lot of low wage employees and watch average wages and productivity rise."

That's exactly right and it is entirely necessary in any functioning economy. The wage increase is most likely a result of our economic contraction.

I think the best news in the report is the increase in hours worked. This is probably the best indicator that there is more work that needs to be done. This is good news for the underemployed and optimistic for the unemployed.